Planning financial security for an unknown future

While premiums pricing may be the primary factor that influences any decision in purchasing insurance cover, consumers are encouraged to also consider other underwriting elements when they choose insurance in order to ensure that their needs are met, says Poovan Perumal, Head of Product and Sales Enablement at Hollard Life Solutions.

Perumal points out that the value of insurance cover is not only determined by premium pricing, but by a variety of other underwriting considerations.

“Consumers should not focus only on the price, but also understand the benefit value and flexibility of some of the options,” he says. “We would advise customers to factor in other considerations, such as the premium rate guarantees, ease of the underwriting process, ability to make policy amendments easily during the policy lifetime, and the claims approval process. Other important considerations are the benefit definitions, premium maximum entry ages, cover end dates and exclusion clauses.”

He concedes that perception of value is also key, especially in a competitive landscape where mortality products are standard.

How COVID-19 changed consumer perception of insurance cover

Perumal notes that the outbreak of COVID-19 has changed consumer perception of insurance cover, which is generally perceived as a grudge purchase. “COVID-19 reminded people of the seriousness and unexpected nature of death, and thus highlighted the need for life insurance protection cover,” he says. “We expect this trend to continue into the future, though we cannot ascertain for how much longer,” he says.

“Consumers are concerned about their health status, as they have realised the correlation between good health and chances of survival in pandemics such as COVID-19. They now understand how their poor health could cost them more in life insurance premiums,” says Perumal.

He adds that changes in lifestyle and the frequency of natural disasters precipitated by global warming have also served to highlight our own mortality and amplified the risk of death. “Global warming and other natural disasters might cause new death patterns that could further highlight the need to protect yourself against the risk of prematurely passing away. There might also be trends affected by culture and changing lifestyle patterns. As lifestyle trends lead to less commitment and a more ‘short-termism’ approach to life, we see people not perceiving the high value of long-term insurance,” Perumal adds.

Increased level of digitisation

Perumal says COVID-19 has also accelerated digitisation and automation in the insurance space. For example, in the underwriting space many companies are piloting automation of their processes by using advanced underwriting algorithms in order to improve the efficiency of the underwriting process.

“The application and fulfilment processes are also being digitalised to improve the customer experience so that issuance times are significantly reduced,” Perumal says. “Further improvements to the claims processes are also being explored to ensure quick turn-around times in paying benefits to policyholders. As technology develops, we will find more devices that are able to monitor health risk more regularly, and this could lead to more dynamic and frequent underwriting. This could lead to products that vary in pricing according to current health status, and will make for interesting trends on how the market reacts to such products.” 

Consumers facing more risks than ever before 

Perumal notes that in South Africa funeral cover still remains the most popular insurance cover by sales volume, due to its relative price affordability and the quick claims pay-out.

He points out that though mortality products such as funeral cover remain popular compared with other life insurance benefits such as disability, critical illness and retrenchment cover, the financial risk of contracting a critical illness or becoming disabled could have dire consequences. 

“Regardless of the lifestyle choices we make, we are all susceptible to myriad risks that are beyond our control. Being injured, retrenched or contracting a chronic illness is now an ever present and clear danger. It is for this reason that consumers should take an honest look at their situation and ask themselves, ‘Is my family financially ready to weather the financial storm of a retrenchment, injury, chronic disease or even death? If the answer is no, then it is time for consumers to consider acquiring enough cover to mitigate against these potential risks,” Perumal concludes.